With tax policy certain to be on the 2019 legislative agenda, a new policy brief from the Washington Research Council should provide valuable perspective to lawmakers. The brief examines Washington’s tax structure, comparing it to the US average, and traces revenue growth, tax burden, and personal income to provide insight. Perhaps surprisingly, the WRC finds,
Washington’s tax structure is unusual,but it yields revenues that are similar to other states by multiple metrics…
Despite its lack of an income tax, Washington’s state and local taxes per capita have largely tracked the national average (see Chart 3 on page 2). In 2016 (the most recent data available), Washington’s state and local taxes per capita were $5,050, above the national average of $4,946. By this measure, Washington ranked 17th in the nation.
As a share of personal income, Washington’s state and local taxes rank near the middle of the pack at 28th among the states. Washington’s rank is lower by this measure than per capita because its personal income per capita is consistently higher than the national average. In 2017, Washington ranked ninth highest in the country in personal income per capita. [Citations omitted.]
Here’s the chart mentioned above.
The Council also cites a Pew research report finding Washington’s tax system is the 14th least volatile in the nation and notes that the increase in the state property tax levy will add to the system’s stability.
As we’ve reported, state revenue growth has been strong in recent years. The WRC brief provides additional context.
Washington’s recent revenue growth has been strong by national standards. Indeed, Washington’s state and local tax growth from 2015 to 2016 was the nation’s highest.
Similarly, state revenue growth in Wash- ington has outpaced the nation since 2015, and it ranked 10th highest among the states in 2017. Other states have not performed as well. Adjusted for inflation, revenues in 16 states have still not recovered to their pre-recession peaks . [Citations omitted.]
Yet, the WRC includes a warning.
The November revenue forecast gave some reasons to be cautious about the future. Revenue Act taxes (retail sales and use, B&O, public utility, and non- cigarette tobacco products taxes), which make up about 75 percent of the state’s revenue sources, were revised down- ward; personal income is growing slower than in recent years; and real estate excise taxes are “assumed to have reached a near-term peak in the first quarter of2018.”
…Legislators should not expect that recent exceptional revenue growth will continue forever and should plan accordingly.
Good advice. And a good – and timely – overview of the state tax structure.